Brazil LPG distributor complains about market distortion

Bnamericas Published: Thursday, January 26, 2023
Brazil LPG distributor complains about market distortion

Brazilian liquefied petroleum gas (LPG) distributor Fogás claimed the fuel market in the states of Amazonas and Roraima has been severely distorted by the privatization of the Reman refinery in Manaus.

Now dubbed Ream, federal oil company Petrobras sold the plant to Atem Distribuidora in November 2022. Since then, the LPG price for distributors increased by 1,240 reais (US$248) per ton, 35% above the average price Petrobras charges in other regions. 

During the privatization process, Fogás told Brazil's antitrust authority Cade and oil and gas watchdog ANP that, if the new owner increased prices, local consumers would be impacted, since Amazonas and Roraima depend exclusively on Ream for fuel supply.

According to Fogás, Ream has attributed the price increase to Petrobras LPG selling to Atem for the same price it sells to the distributors in Coari, Amazonas state, leaving no margin for the refinery to cope with operations costs and investment amortization.

Coari is a key natural gas terminal, which distributes output from Petrobras’ natural gas fields in Solimões basin, in the Urucu hub, one of the largest in Brazil. 

Also, on January 6, Petrobras started charging full freight fees for transport on a 457km waterway stretch between Coari and Manaus. Before the privatization, Petrobras’ logistics subsidiary Transpetro was responsible for transport and did not charge fees. 

Meanwhile, Petrobras continues to bear the full river freight and piloting costs on the 2,066km stretch between Coari and Pará state’s Belém, which also causes a distortion in the market, considering the logistics involved.

In a recent letter to ANP, Fogás highlighted that consumers in Amazonas and Roraima, where human development indexes are below Brazil’s average, are now paying the highest fuel prices in the country. 

According to Fogás, LPG is being commercialized in Belém at the same price as in Coari, without considering the high river transport and piloting costs between the two localities. 

“This unjustifiable subsidy, which is equivalent to more than 10 reais per cylinder, allows, for example, that LPG distributors based in Belém can have more competitive prices to operate in most of the state of Amazonas and even in Manaus,” Fogás said. 

In the current scenario, the company said it must make urgent logistics decisions, which will demand investments. But before that, Fogás wants to know if Petrobras intends to keep its LPG pricing policy in Coari and if it plans to review the river freight subsidy policy for Belém. 

“If not, shouldn’t the same policy be applied to Manaus as well?,” Fogás wrote. 

When contacted by BNamericas, Petrobras’ press office replied that the LPG market is open to competition and agents have pricing freedom in all stages of the commercialization chain, during production, import, distribution and resale.

The company reaffirmed its commitment to charge market prices, not passing on the volatility of international prices and the exchange rate, without any subsidy.

“For competition reasons, we cannot anticipate decisions about price maintenance or readjustment,” Petrobras added.


The sale of Petrobras’ refineries is part of a 2019 agreement with Cade to end the company’s refining monopoly and increase competition, aimed at lower prices for end consumers. 

The agreement involves the sale of eight plants that account for around 50% of Petrobras’ refining capacity. But only Reman, Landulpho Alves (RLAM), in Bahia, Lubrificantes e Derivados do Nordeste (Lubnor), in Ceará, and SIX, in Paraná have been divested. 

With a more statist view, the government has halted the sale of the Gabriel Passos (Regap) refinery and is likely to stop the divestment processes for the Abreu e Lima (Rnest), Presidente Getúlio Vargas (Repar) and Alberto Pasqualini (Refap) plants. 

Associations and researchers cast doubt on claims that privatization of the refineries would increase competition, saying divestments would have to be accompanied by infrastructure and logistics investments, since the plants were not designed to compete but complement each other.

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